Navigating Finance Trends: How Accounts Payable Adapts in 2024
The landscape of higher education finance is ever-evolving, and as 2023 wraps up finance teams at universities across America are exploring ways to get better in 2024. While the future remains uncertain, current indicators suggest that the finance trends that emerged in 2023 will continue to influence higher education institutions throughout the upcoming year. These trends include rising inflation, talent shortages, expanding tax and audit requirements, the persistent threat of fraud, and a growing emphasis on technology adoption. In this article, we'll explore how each of these finance trends will uniquely impact the Accounts Payable (AP) departments of higher education institutions and how they can adapt to thrive in this dynamic environment.
1. Staff Turnover:
The effects of the "great resignation" are reverberating across all sectors of the economy, including higher education. Retaining highly skilled employees and maintaining productivity has become a significant challenge for finance teams in academia. Stressed and overworked team members are seeking greater job flexibility and modern tools to streamline their tasks. To avert critical staffing shortages in 2024, AP departments should leverage technology, like Accounts Payable automation, to transform their roles from being perceived as mere "paper pushers" to becoming strategic contributors to the institution's financial stability.
2. Digital Transformation:
Gartner reveals that 69% of CFOs are planning to increase their investments in digital technologies. This heightened focus on technology underscores the critical role modernized processes play in delivering real-time, accurate financial data to higher education institutions. AP leaders, therefore, should collaborate with colleagues across the Procure to Pay process and prioritize projects that will address the CFO’s top concern: cash flow. Three high-value options for maximizing cost savings and optimizing outbound cash flow include:
A) Increase Process Speed and Accuracy:
Today’s fast and highly accurate, digital invoice capture solutions provide organizations with the earliest possible visibility into their vendor invoices. Digital capture technology works 24x7, which will provide your AP team with fast and accurate invoice data and your Payments team with the pending payment information it needs to control outbound cash outflows. It will even provide your Treasury team with better cash flow forecasting data.
B) Automate Strategically:
Prioritize automation projects that will deliver the best value to the organization. For example, automating data validation at the start of the AP process can reduce downstream workloads by up to 50%. Robots can use rules to quickly detect and reject duplicate or incomplete invoices as soon as they are received, saving AP time and effort. Similarly, fraud monitoring can also be automated to prevent potential cash losses. Robots can quickly scan large volumes of invoices and flag them for further investigation by a fraud specialist so that organizational cash is protected from fraudsters.
C) Deliver Results with AP Reporting and Analytics:
Digitizing AP processes can deliver a wealth of data to your organization and put key cash flow metrics at your fingertips. Look for solutions that will allow you to measure AP processes in realtime. Then, track and measure every step in the process to uncover friction points. With information on total invoice exceptions, percentage of digital invoices, and time spent answering vendor queries, you will be able to determine where you need to improve processes and invest in future digital transformation initiatives.
3. Optimize Vendor Payments with Effective Communication and Prioritization
Handling invoice exceptions is a time-consuming process for AP, and contribute to vendor payment delays. According to Ardent Partners, even if there is a purchase order in place, almost one-quarter of all purchase order invoices (PO-invoices) have some form of an exception, which the AP department must resolve.
Here are some tips for minimizing exceptions and optimizing vendor payments:
- Automate and standardize vendor communications. Vendors just want to get paid, so they may submit invoices that don't meet your specific policies or procedures. To help avoid this, consider automating and standardizing responses to vendors whenever an invoice is rejected. The messages should provide clear guidance on why the invoice was rejected and how to fix it. Standardizing vendor communications will gradually train your vendors on how to submit higher-quality invoices so they can get paid quickly.
- Optimize processing for your top vendors first. Fixing all the problems with vendor invoices can seem like an impossible task, especially if you process invoices from hundreds of vendors. By optimizing processing for your top vendors first, you can develop strategies that work for those vendors and then apply the same strategies to others. For example, you can standardize invoice formats, streamline purchase orders, or establish a process whereby vendors submit individual versus batch invoices. When top vendors are reliably paid in a timely manner, it will strengthen your supply chain and business partnerships.
- Centralize communications in a vendor portal. Most companies have switched to digital communication with their vendors, but exchanging emails can reduce process transparency. The information can be lost in an individual email inbox and difficult to share with others in the AP department or with the vendor or buyer. Using a B2B vendor portal will centralize all vendor communications in a single location where everyone involved can view the complete invoice history with up-to-date status and payment information. This makes it easier to resolve exceptions quickly and easily.
4. Increasing Fraud Risk:
Fraud continues to pose a persistent threat to organizations globally. According to the Association of Finance Professionals, a staggering 71% of organizations were targeted by fraud attempts in 2022, with 58% of those attempts directed at the AP department. As the size of an organization and the number of payment accounts managed increase, so does the risk of fraud. Higher education institutions must remain vigilant in 2024 to protect themselves from payment fraud and ensure the integrity of their financial operations.
By embracing the ever-evolving financial landscape of higher education, Accounts Payable departments can position themselves at the forefront of change. Recognizing the impact of emerging finance trends and proactively adapting to them will enable higher education institutions to successfully navigate the challenges of the coming year. Emphasizing the strategic role of AP, embracing technology, and implementing robust fraud prevention measures are key strategies for ensuring the financial well-being and stability of these institutions in the face of uncertainty. Interested in exploring AP automation for your university or college? Request a 1-1 product demo with our team.